First-principles calculations based on the density functional theory supplemented with an empirical van der Waals interaction are used to explore the effect of Ag-atom intercalation on the electronic structure of graphene on Ni(111) surface. We first confirm that in the most stable configuration graphene is chemisorbed on Ni(111) with binding distance in good agreement with experiments. We also clarify the conflicting interplay of symmetry breaking of the graphene sublattice and hybridization of graphene π orbitals with Ni d states in the bandgap opening of graphene. Upon intercalation of Ag atoms in the interface of graphene/Ni(111), the characteristic energy bands of graphene recover with or without a bandgap depending on Ag coverage. The bandgap is largest for fractional Ag coverage of ∼1.3 monolayer (ML) and is appreciable for fractional Ag coverage. These bandgap openings are consistent with the recent experiments [Varykhalov, Scholz, Kim, and Rader, Phys. Rev. B 82, 121101(R) (2010)], which, however, have been claimed to be the results for 1 ML Ag coverage. Our calculations also demonstrate that an appreciable bandgap does not open when intercalated Ag atoms of high concentration form a flat layer, which mimics the situation of graphene/Ag(111). These results imply that the actual Ag coverage achieved in the experiments was different from 1 ML. A key role may be assigned to such a fractional Ag coverage, for which graphene-Ag distances are intermediate between those of chemisorption and physisorption, and a bandgap is induced by rather strong interactions with Ag atoms. The Ni(111) substrate plays only a role of supporting such a sparse Ag-atom distribution. Similar arguments also apply to the recent experiments on graphene/Au/Ru(0001) [Enderlein, Kim, Bostwick, Rotenberg, and Horn, New J. Phys. 12, 033014 (2010)] in which a substantial bandgap also opened in graphene for the claimed 1 ML Au coverage.